Correlation Between WT Microelectronics and U Media

Can any of the company-specific risk be diversified away by investing in both WT Microelectronics and U Media at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining WT Microelectronics and U Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WT Microelectronics Co and U Media Communications, you can compare the effects of market volatilities on WT Microelectronics and U Media and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in WT Microelectronics with a short position of U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of WT Microelectronics and U Media.

Diversification Opportunities for WT Microelectronics and U Media

0.07

Correlation Coefficient

WT Microelectronics  U Media

Significant diversification

The 3 months correlation between 3036A and 6470 is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding WT Microelectronics Co and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications and WT Microelectronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on WT Microelectronics Co are associated (or correlated) with U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of WT Microelectronics i.e., WT Microelectronics and U Media go up and down completely randomly.

Pair Corralation between WT Microelectronics and U Media

Assuming the 90 days trading horizon WT Microelectronics is expected to generate 2.43 times less return on investment than U Media. But when comparing it to its historical volatility, WT Microelectronics Co is 6.29 times less risky than U Media. It trades about 0.05 of its potential returns per unit of risk. U Media Communications is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,913  in U Media Communications on September 24, 2024 and sell it today you would earn a total of  457.00  from holding U Media Communications or generate 9.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

WT Microelectronics Co  vs.  U Media Communications

WT Microelectronics

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WT Microelectronics Co are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WT Microelectronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

U Media Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Media may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WT Microelectronics and U Media

The main advantage of trading using opposite WT Microelectronics and U Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT Microelectronics position performs unexpectedly, U Media can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in U Media will offset losses from the drop in U Media's long position.

The idea behind WT Microelectronics Co and U Media Communications pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.